Resources Minister Martin Ferguson has suffered a defeat at the hands of the Greens in the Multi-Party Climate Change Committee process and will lose control of $3.2 billion worth of renewable energy programs to the new, independent Australian Renewable Energy Agency (ARENA) as part of the carbon pricing package to be announced on Sunday.

ARENA will operate under the Commonwealth Authorities and Companies Act and be headed by an independent statutory board to be appointed by cabinet. But unusually for a statutory agency, it will report directly to cabinet -- CAC bodies normally report to cabinet and Parliament via their portfolio minister. This further limits any role for Ferguson in the administration of renewables programs. The new body is likely to be staffed by existing Department of Resources, Energy and Tourism staff.

The board will be responsible for allocating $3.2 billion in existing funding, just under half of which is already committed; it is understood existing allocations will be honoured by the new board. However, the agency will also receive an additional, as yet unspecified amount of new funding to be announced Sunday.

Ferguson's lack of enthusiasm for renewables and vocal support for nuclear power has long made him a particular target of the Greens, who regard him as the friend at court of the fossil fuel and nuclear industries. But they have been particularly concerned that the Rudd and Gillard governments' investments in renewables have been plagued by delays, cuts, re-announcements and continuing uncertainty for the renewables industries.

The intention of ARENA is to provide a greater strategic focus to what is currently a disparate range of programs and provide greater long-term certainty for an industry highly dependent developmental and regulatory assistance until a carbon price closes the gap between renewables and cheaper emissions-intensive energy.

That gap may be some time in closing. While under a sufficiently high carbon price, renewables programs should be unnecessary, the likely $23 a tonne starting carbon price and assistance for the electricity industry means a long transition time in the energy sector.

Shifting the allocation of government funding in renewables to an independent board -- which will include appointees from business with backgrounds in energy, finance and business -- charged with taking a more strategic approach to support for the industry is likely to provide better direction than officials and ministers administering discrete programs.

Funding for large scale green energy projects and R&D is to be stripped from the control of Energy Minister Martin Ferguson and put under the control of two new independent statutory bodies. The newly formed Australian Renewable Energy Agency will take charge of $3.2 billion of funding for R&D, pilot and demonstration projects, around half of which is already committed, while a Clean Energy Finance Corporation will also be created to ensure the continued rollout of commercial projects around the country.

The creation of two new bodies independent of the Department of Energy was considered to be crucial, as funding for new technologies such as geothermal and solar were constantly delayed and was always focused around the narrow measures of grants based schemes, which made it impossible for many new companies to raise matching funds.

The new institutions will likely consider loan guarantees as well as tariffs to encourage the deployment of renewables, as these have proved to be the most effective in the US and Europe, as well as in South America and Asia. Further details are likely to be unveiled at a solar summit to e held in Canberra on Friday, which will discuss the measures needed to support the rollout of large scale solar projects, which are coming down rapidly in cost and which are now increasingly recognized as critical for the transformation to a low carbon electricity grid.

ARENA will absorb the activities of 10 different programs, including Solar Flagships, the Renewable Energy Development Program, and the Emerging Renewables Fund, as well as the activities of institutions such as the Australian Solar Institute and Australian Centre for Renewable Energy. While Arena will focus on commercialization, the CEFC will have carriage over the deployment of such technologies. Details of ongoing funding will be released as part of the carbon pricing package to be released on Sunday.

Greens Senator Christine Milne said there are currently 11 different funding programs run by the Commonwealth government for renewable energy and, historically, almost none of them have been appropriately run, and many technologies and entrepreneurs had been forced overseas. “Government funding programs are announced with a big public splash, innovators and entrepreneurs start to gear up to deliver them, and, after months or years of delay, the programs are re-badged, re-allocated, scrapped or so badly designed that nobody is able to take advantage of them," she said.